Surge in Canadian imports boosts talk of recovery

Thu Sep 10, 2009 10:05am EDT
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By David Ljunggren

OTTAWA (Reuters) - Canada posted a near-record trade deficit in July, but analysts said a surge in imports in the month was a sign the economy was starting to recover from the global meltdown.

Statistics Canada said on Thursday that the deficit hit $1.43 billion on sharply higher imports of machinery, automotive and energy products. Exports were also up, but at a more modest pace.

Analysts had predicted Canada would run a surplus of $100 million in July. The deficit was the second highest on record, beaten only by the $1.45 billion notched up in May this year.

Imports increased by 8.3 percent from June to $31.73 billion, reflecting a 10.9 percent increase in machinery and equipment imports, an 18.7 percent jump in automotive products as well as an 18.6 percent rise in energy products.

"The solid and broad-based gains in both export and import volumes are another sign the Canadian recovery is indeed taking hold," said Douglas Porter, deputy chief economist at BMO Capital Markets.

Exports rose by 3.3 percent to $30.31 billion, largely because of higher shipments of machinery and equipment and automotive products. Exports of energy products shrank by 3.2 percent, largely from an 8.9 percent drop in crude petroleum.

"Details of the report suggest that the economy is coming back to life, despite the deficit ... the composition of both imports and exports suggests that the Canadian trade dynamics improved in July," said Charmaine Buskas, economics strategist at TD Securities.

Analysts doubted the trade figures would persuade the Bank of Canada to break its promise to leave interest rates at record lows until next year to help stimulate the economy. Shortly after the statistics were released, the central bank said rates would indeed stay where they are.   Continued...